Amazon Announces It's Buying Whole Foods; Supermarket Stocks Plummet

Amazon's acquisition of Whole Foods Market is sending the stocks of grocery store operators and other companies that compete with Whole Foods plunging.

Investors worry that Amazon, which has already won over hordes of shoppers of clothing, electronics and many other kinds of goods, wreaking havoc on department stores and other brick-and-mortar retailers, will do the same thing with groceries.

Online juggernaut Amazon announced Friday it is buying Whole Foods in a deal valued at about $13.7 billion (C$18.1 billion), a strong move to expand its growing reach into groceries.

Amazon.com Inc. will pay $42 per share for Whole Foods Market Inc., including debt. That marks an 18 per cent premium to Whole Foods' closing price on Thursday.

The deal comes a month after Whole Foods announced a board shake-up and cost-cutting plan amid falling sales. The grocery store operator was also under pressure from activist investor Jana Partners.

The grocery chain, known for its organic options, had been facing increased pressure from rivals, including European grocery chain Lidl, which is planning to enter the East Coast market, along with Aldi and Trader Joe's.

Amazon, meanwhile, has been expanding its reach in goods, services, and entertainment.

Whole Foods will keep operating stores under its name and John Mackey will remain as CEO, with headquarters in Austin, Texas.

The company, founded in 1978, has struggled to differentiate itself as competitors also now offer a plethora of fresh and organic foods, and has said customers may be choosing "good enough'' alternatives closer to home. In addition to other natural and organic grocers, it has cited pressure from restaurant chains, meal-delivery companies and traditional supermarkets such as Kroger.